This is a collection of THOUGHTS AND OPINIONS that I thought may give you further inspiration to improve your commercial awareness knowledge. Of course you may completely disagree with what I say – and that’s all good! What is key, though, is that you must try to back your opinions with concrete facts, have an identifiable line of thought and reach actionable conclusions.
Feel free to use the themes identified below as a launch pad for your own research. What I’ve said here is not at all comprehensive – it’s more of a train of consciousness! However, you can use this to identify areas of interest that are specific to you and then expand on them whether this is for study purposes, job interview purposes or to provide food for thought for your broader career in general.
DOES TURMOIL IN SOUTH KOREA MAKE AN INVASION OF TAIWAN MORE LIKELY OR LESS LIKELY?
President Yoon Suk Yeol tried to impose martial law but then the military was stood down. His leadership is in doubt at a time when tensions with North Korea are also rising.
South Korea is looking very precarious at the moment. President Yoon Suk Yeol’s decision to impose martial law was highly controversial but, in the end, it only lasted for about six hours! It’s ironic that, in his previous role as chief prosecutor under presidential predecessor Moon Jae-in he oversaw the imprisonment of both former president Park Geun-hye and Lee Jae-yong, the former chair of Samsung over a bribery scandal that led to Park’s impeachment in 2017. Well Yoon Suk Yeol managed to survive impeachment for now but you have to wonder how he can rule long term given this colossal error of judgment.
Given how precarious the president’s position is right now and the obvious sensitivities regarding North Korea (he portrayed opposition figures as being “pro-North, anti-state forces” and look where that got him!) and its new involvement in the Ukraine war you would have thought that, from China’s point of view, this is as good a time as any to launch an attack on Taiwan. Biden’s on the way out, Trump hasn’t taken office yet, Europe is distracted by Ukraine and everyone’s distracted by the Middle East while Japan’s political situation is also very tricky at the moment.
Is it more or less likely though? I’d say that China has its own domestic problems to deal with currently and it will presumably want to have some time to announce and at least start to implement the stimulus package that everyone think’s they’re about to. Having that threat of invading Taiwan in the president’s back pocket could be a useful negotiation tactic to rein in Trump’s sanction ambitions (or at least take some of the edge off). FWIW, I think that China will either invade Taiwan if Chinese people tire of the economic malaise (because a war could galvanise and distract them) or if China is actually crushing it in terms of the economy because the president could use success to whip up nationalistic frenzy. However, I think that the latter is highly unlikely.
What are the commercial implications though?
Well I don’t think defence spending is going to slow down any time soon! I do wonder, though, whether this will slow investment in the region (obviously Taiwan, but perhaps in the region as a whole while everyone waits to see what China does). If that happens, where will it go? Perhaps India? Perhaps Vietnam (although Vietnam might prefer to fly under the radar so as not to provoke the Americans, with whom it is currently running a trade surplus)? Probably not South Korea, though, given the situation at the moment!
ARE THINGS REALLY THAT BAD IN THE UK ECONOMY?
I don’t think so. Retailers and those in hospitality are hugely concerned about the impact of NICs and minimum wage hikes on what they’ll be charging to customers. Customers have already had to absorb a lot of extra costs over the last few years and there’s a limit to how much more they can absorb! Any sector that has reasonable exposure to a lower paid workforce will be particularly exposed.
Recent surveys have shown that businesses in particular are, ironically, not confident about the prospects for the broader economy, but they are getting more confident about their own. I say this is ironic because if everyone is confident about their own business, then that means that the economy will actually do quite well!
I would also suggest that the UK is likely to make progress in the EU because we have a new regime with no Brexit baggage, the EU is in danger of splintering as two of its biggest constituents (France and Germany) are in all sorts of bother at the moment which means that it’s going to be more likely to do deals with the UK, where the government is more aligned with its own values.
IS IT WORTH BUYING INTO BITCOIN NOW OR IS IT TOO LATE?
Although bitcoin has shot up by 50% since Trump got into power, the fact that Trump has his own interest in the cryptocurrency (World Liberty Financial), that he’s nominated a fan of crypo (David Sacks) to replace the arch-enemy of crypto (Gary Gensler) as head of the SEC in addition to his bromance with Musk, crypto fan and doge overlord, you would have thought that this would be very difficult to bet against.
I’m still not really all that convinced about bitcoin fundamentals but the fact that you’ve got a government with a very strong mandate, four years of Trump stretching ahead of us and very clear personal interests in bitcoin doing well, then I don’t see any real bumps in the road unless some massive scandal emerges and crypto falls through the floor. However, in order for it to get real legitimacy longer term, it must be regulated.
So is now too late? I think not. OK, so you’re possibly not going to get the heroic returns that your mate down the pub boasted about when he bought bitcoin at $500 or something but you are likely to get something. Apple is a great example of a stock that faced perennial concerns of this nature – and that thing has just grown and grown! I don’t like bitcoin, there’s a lot of dodginess about it, but at the end of the day there are perhaps more reasons to buy it than not.
BTW, this is opinion – NOT FINANCIAL ADVICE. I don’t own any BTW, but I am thinking about it!
WHAT SHOULD BE DONE TO BOOST EV DEMAND ON A SUSTAINABLE BASIS?
China has won the war for EV batteries. It looks like it could win the war for EVs as well if the incumbents’ fortunes don’t turn around soon!
European, American and Japanese makers are losing ground in the Chinese market, the biggest car market in the world. They are also losing ground in their own markets as customers who have been getting through the cost-of-living crisis just don’t feel inclined to buy EVs that are expensive to buy, will depreciate like crazy and will give them range anxiety.
That being said, it’s not a case of whether EVs are coming, it’s a case of when! The ZEV mandate is an example of a regulatory framework that charts a very real path towards the complete adoption of EVs. So what can be done now to get people buying?
Firstly, the cost of EVs need to come down. How do you do that? Well the battery represents about 40% of the cost of the car. Battery prices had been expected to trend down over time, but haven’t quite behaved like that. Supply chains need to improve and manufacturing costs need to come down. This is already occurring with the use of new materials, shared vehicle platforms and, in some cases, joint ventures between different manufacturers.
Secondly, something needs to be done about depreciation. I think that this is all about the battery as batteries degrade over time (or at least there is the perception that they do in a meaningful way). Why not take a leaf out of NIO’s book and use swappable batteries? That way, if a battery has degraded too much, it can be swapped, recycled and eventually be put back into circulation. There was a lot of resistance to this, with Tesla being particularly vocal about it – but although the company said it was for technical reasons, I think that they didn’t want it to work because they’d poured tens of billions of dollars into existing battery tech that they didn’t want to see that going down the drain. At some point, I think that batteries will be commoditised and be very cheap – but until that day comes, I think they will be the major driver of depreciation.
Thirdly, range anxiety needs to be cured. I think that this won’t be too far away what with charging networks improving all the time while advances in new battery technology continue to add to the distance these cars can go on a single charge whilst also cutting charging times. Still, we are not there yet.
But maybe ownership has to change. Maybe, in order to avoid the sting of depreciation, we need to stop owning cars and start hiring them? Volvo already offers this option and Porsche has done this in the past in some countries. If that is the case, then there is no massive initial outlay and depreciation isn’t a problem because you don’t actually own the underlying asset.
In conclusion, if governments want to encourage EV ownership asap, they will need to provide more incentives and kickbacks. This will work in the short term, but it is not a long term solution as it will become an increasing burden on the state. However, something needs to be done otherwise there will be no car manufacturing industry left outside China…
WHAT'S THE ENDGAME WITH CHIPS?
There’s a lot of talk about advanced chips in particular. 90% of the world’s advanced chips are made in Taiwan – and Taiwan’s situation regarding China continues to look somewhat precarious (something else I’ve mentioned above!).
Moves have been made to spread the production elsewhere, but this isn’t something that one can change overnight.
WHAT'S GOING TO HAPPEN WITH UK HOUSE PRICES?
I would expect house prices to go bananas in the first quarter of next year until the stamp duty deadline in April when the threshold for paying stamp duty goes back up. Once that happens…